By South Matters Business Desk | Economy
India is reportedly preparing a series of measures aimed at attracting foreign investors as the country faces continued pressure from capital outflows and weakness in the rupee.
According to reports, the Union Cabinet recently discussed proposals that could reduce taxes on government bond investments and make it easier for global funds to invest in Indian debt markets.
Tax Relief Under Consideration
Sources indicate that the government is considering a reduction in the current 20% withholding tax on interest earned from government bonds.
Additionally, policymakers are examining options to relax investment ownership limits for foreign institutional investors.
Supporters of the proposal believe these changes could increase the attractiveness of Indian debt markets and encourage fresh overseas capital inflows.
Record Foreign Outflows Raise Concerns
India has witnessed significant foreign investor selling during the year.
Reports suggest that equity outflows have crossed ₹2.25 lakh crore, making it one of the largest periods of foreign selling on record.
As a result, domestic institutional investors and retail participants have played a crucial role in supporting market stability.
Retail Investors React
Many retail investors expressed mixed reactions to the reports on social media.
Some argued that domestic investors have helped stabilize markets during periods of heavy foreign selling.
Meanwhile, others questioned whether additional incentives for overseas investors should be accompanied by measures benefiting domestic market participants.
Markets Recover After Reports
Indian markets initially traded lower on Wednesday.
However, benchmark indices recovered part of their losses after reports emerged regarding possible reforms aimed at attracting foreign capital.
Investors are now closely watching for official announcements from the government.
No Official Confirmation Yet
So far, neither the Ministry of Finance nor the Reserve Bank of India has officially confirmed the proposed measures.
Reports also mentioned speculation surrounding a possible review of capital gains taxes, although no formal proposal has been announced.
Focus on Long-Term Capital Inflows
Experts believe that attracting stable foreign investment remains important for supporting economic growth, strengthening the rupee and improving market liquidity.
If approved, the proposed reforms could make Indian government bonds more competitive among global investors.
For now, market participants await official clarification on the government’s next steps and the potential impact on India’s financial markets.